>> >> sally delivers, buld. i'm jim cramer, i will see you tomorrow! good evening, everyone, i'm larry kudlow. this is "the kudlow report." on the six-month i was in of superstorm sandy, chris christie came out all over the media world with both guns blazing that he was right to work with president barack obama on the eve of last fall's election. you know what, he has a 67% approval rating. you know what else, he's a contender. now, a big day in the market. believe it or not, the italians formed a government. that seemed to have wall street cheer. inflation is fallings, consumers are spending, the fed will keep on pumping. bet on get speaking of the feds,

early next year my take is bernanke is stepping down. but who should replace him? i will tell you my pick and a few runners up, that is if you stay with us. "the kudlow report" begins right now. ♪ >> when you wake up on tuesday, october 30th, 7 million of your 8.8 million citizens are out of power, there's not a school opened, not a water treatment or waste water treatment is operational. 51 gas stations in the whole state are opened. you are not sitting there worried about presidential politics, joe. >> yeah. >> you've got people suffering. you say, i've got to do my job. >> all right, six months after hurricane sandy, new jersey governor chris christie, both guns blazing, make nos aplogies to conservatives or anybody else for doing business with president barack obama on the eve of the last election. in fact, krisie says he has no

regrets. take a listen. >> i asked how the president is doing, i said, he's doing a good job, he's kept his word. everybody knows i have a 95% disagreement level with barack obama on principles of philosophy t. fact is, we got a job to do. >> all right. with all that said, i think governor christie is a smort ombre and a front runner, i'm not choosing sides, i'm saying he is a front return and a powerful one at that. we have tennessee republican share and joining me is utah representative jason chapins. go to you first, krisie has been tough. he's always tough, when he believes something, he goes alt it. when you look back on that whole episode, do you believe the governor was right to do some business with obama, even though it may have cost romney the election? >> hey, i was a huge mit t romney fan and the timing could

not have been worse in that presidential election, but the governor's job is to look after the people of new jersey. he was unabashed on it. you look back, go, i would have wanted to do everything politically, but for the people in new jersey, he probably did the right thing. >> that's what i think. chip, you have any disagreements on that? >> no, i think the congressman is right. welcome to the double-edged sword of politics we live in. it was the right thing for the governor, it was right for the folks in his state. but if he wants to run for president if 2016, i think we will hear that quote probably not in a positive way, probably in iowa and south carolina? >> which company did you run last time around? >> governor huckabee. >> don't you think who i know and admire, governor huckabee, i love going on his radio show, done you think he would have done the same thing chris christie did as representative chapins just said, you got to take care of your own before you go out there on the national stage even though the politics

may be distasteful? >> that's right. that's what you are paid to do. he has a 67% approval rating. huckabee was from arkansas. he worked within the president for the best of the state of arkansas. you do those things. sometimes it bites you. go ask charlie kris. that hug probably cost him a senate race. >> he had no pressing reason, though. i think that's a different thing. look, i'm not endorsing here. it's way too soon to endorse. i'm not going to do anything of the sort. but i do remember this, people think krisie helped obama. they ought to replay i think the reagan library speech that krisie gave so phenomenal, talking about how obama was demoralizing the economy, he was tough as nails against odama. he was just doing his job here it seems to me, he knows get what he's saying on the

six-month anniversary is i want everybody to know i'd do it again if i had to do it over again. >> in this specific incident of this national disaster, i understand why he did what he did. i can tell you on the whole, president obama has not united this unk. remember when he said, we're not red states, we're not blue states. we're the united states t. president hasn't acted like that by and large. did he come to the aid and do in sandy, did that tie him up in a bad way for mit t romney? i think so. looking back on it, i think chris christie will say, yeah, i did what i did. i'm in the ashamed of it. >> do you think republican republican is always attacking, attacking rich people, oil and gas companies. we will get him back later in the show. she back attacking health insurance companies and the rest. do you think he's changed his tune? is he less divisive now? is this charm offensive, maybe you have been a part of it. is that a different obama or is this just a politically clever

obama? >> ah, he came in and met with the house republicans. i take him for his word. he spent an hour-plus talking this through. i think his chief of staff is reaching out more, trying to do more. but when you get to tough issues like immigration and how to fix obamacare, it's totally broken and other issue, i don't see the president engageing with rank and file people in the house and senate. i don't see him using the way to the white house. peggy noonan in a new york times article, she nailed it on the head, the president doesn't know and have the inclination on how to use the power of the president. >> chip, who are you for right now regarding 2016? >> we got a lot of candidates. i hope my former boss governor mike huckabee would consider rung again. i think he's exactly what the party needs. he's a wonderful communicator. >> he's a great man. he's making too much money as a tv and radio personality, chip. >> well, that's what, i hope he knows for the greater good of

this country he should probably run for president one more time. i think he could be successful. >> how about after huckabee, your second spot? >> i got a lot of friends, jasons that same problem. marco rubio was our state chairman in florida. i'm friends with rand paul. i'm friends with governor haslem in tennessee. i don't know governor christie. there is a lot of postives things you can say about him. the good news is we have a deep bren bench. they will go through the primaries, i think we will come back with the best candidate not to unite our party but the country. >> jason chapin, i go to you on this, krisie is a sure shot to be re-elected in new jersey, a very deep blue state. okay. the point i want to make is, i don't see how the republicans can win the next election without somehow taking back one of the blue states. okay. whether it's new jersey or new york or illinois, or michigan or

even california. you go back and look, we haven't won those states, republicans haven't won those states in so long. so that's what is so intriguing about christy. -- christie. he could take back a blue state or two. >> he's the rockstar type of status. that's why i think marco rubio fan. paul ryan has got to be at the top of the list. >> paul ryan had the growth message. christie has taken on the union, entitlementings. christie want at 10% across the board tax cuts. that's pro growth. has he lost his jack kevin per favor? >> no, when you get into the depth of poishlgs there is nobody better than paul ryan. he's done it in wisconsin and he's shown that he could bring people together. so in now having gone through that vice presidenttial experience i think he's very formidable.

>> no question about it. all right, folks, appreciate it. now, the feds are coming after a big drug-maker, right, allegedly bribing doctors. do they have a case? we have the latest on the novartis charges ahead. later on the show, obamacare is a train wreck for democrats. it's getting less expensive, less popular every day. premiums are going up, 2014 can be like 2010 with big democratic losses in the senate and the house, because of this obama care train wreck, we will talk about get don't forget, folks, free market capitalism is the beth path to trance parity. how about a market oriented healthcare system? think about i. i'm can you do lie, we'll be right back. . . . famers presents: fifteen seconds of smart.

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>> >> do you remember the outrage and storm last year when "60 minutes" aired a segment how members of congress are immune from insider trading rules. watch this clip from "the daily show." >> i have to check with my broker based on what happened here. >> funny or not funny. congress was supposed to force itself to follow the same rules as everything else does.

did fa happen? we have the latest on the so-called stock act later in the show. the federal government in the united states is suing a drug company, novartis. they are saying they took doctors out to dinner. oh my god, let's get a report on the details first. then i will get some angriness about it. here's andrea day. >> reporter: in this case, doctors are accused of wining and dining doctors in hooters, that's it. hooters. the justice at the present time -- the justice department is accusing novartis for setting up fishing trims off the coast of florida and at a fantsing dancing spot nobu and, of course, hooters. the letter was all to increase sales of the company's drugs. this is the second wave of charges against novartis in just

one week. authorities now saying that for a decade, the swiss drug maker paid millions to doctors in exchange for steering patients towards its drugs. now, here's what the u.s. attorney had to say about the whole thing. novartis corrupted the prescription drug dispensing process with multi-million dollar incentive programs that targeted doctors, who in exchange for illegal kickbacks steered patients towards its drugs. novartis in its statement disagrees in the way the government is characterizing them. back to you, larry. >> i appreciate it. why is it the obama administration hates business? what? wrong with going to hooters, what's wrong with taking a couple young doctors to hooters to have a hamburger? i think the obama administration hates drug companies. they also hate health insurance companies. you know what is a close third,

they especially hate oil and gas. all right. that's really something. you know in this company, work in the private sector, sales people take their clients out to dinner all the time. they go to conferences. they have their clients speak. are we supposed to believe, by the way that doctors are too stupid to know the difference between a drug that works and one that doesn't? i just don't get this. i want to bring in, utah congressman chapins. what do you thinkant this? i don't get this. goetd, you tell me. >> i got to believe the doctor isn't suddenly prescribing something because he got some wings at hooters. it seems like it goes beyond -- they're sensationalizing this. if they have a case to make, go to if court. they can go through the adjudication process. the reason they're putting hooters out there in front. they're trying to sensationalize it. novartis has a stellar representation, if they've done something wrong, overspep

stepped their bounds, there needs to be a way their private companies can go through and do the education. >> it's their money. if they took them on fishing trips, they took them to nice hotels, they took them to fancier restaurants than hooters, it's novartis' money. it's called client/sales relationships. i worked in the private sector for a long time. i don't know if you did. i don't get this at all. oh my gosh, fishing trip, i was reading the "wall street journal" thing. fishing trips, can you imagine that? >> again, they're a private company. they should be able to educate and take people to programs they want to. >> this is different than the gso. >> that's right. >> you were prosecuting get is there a difference here? >> yes, when you talk about public funds, of course it's different. but you are talking about a privately-held corporation who is educating people. that's their own business. >> well, i just think this is incredible. more anti-business stuff coming out of the obama administration. next topic, countries in europe. they finally physical out what we have been saying all along,

please, cut your competent tax rate. then companies will keep your money in their country. we'll finally get some economic growth out of this you know what, a big story today. portugal the doing it. ireland has already done it. the united kingdom is doing it. the question; when are we going to do it? jason, i want to go to you on this, it's very interesting, portugal cutting their tax rate. britain the netherlands already has a tax rate. every one of these guys are around 22, 23, 24, 25%. the united states at 35-40%. when will you drive home a corporation tax cut? >> the united states of america has the single highest corporate income tax in the world. if we're going to compete in the global marketplace, of course we got to drive it down. we got to broaden the base, low tr rate. dave camp the chairman of the ways an means committee is committed to this. we got to get rid of those loopholes, bring that rate down, become competitive. repatriation i think is a huge

thing. i recognize -- >> money overseas, bring the cash back, build a factory, don't tax on the debt. >> exactly. go to a territorial system. be able to compete in the world markets. some of our biggest corporations have billions by the tens of billions sitting overseas. that should be infused into the american economy. >> you request do that right now, before you get to the complexities of tax reform, you could have a holiday on that overseas money. jason, let me ask you this, though, politics. politic, politic, politic, republicans are sounding a little root canal, a little dead austerity, cutting medicare, cutting medicaid, cutting food stampts, cutting unemployment insurance. if you go for this corporate tax reform, can you get back to the growth message that ronald reagan taught the gop is a winner? and i don't hear a lot of growth from the gop. >> that is the reason to do tax reform. ba us the single best thing we can do to drive revenue to the

treasury is get companies making money, getting people back to work. right now, we are paying more than $600 million a day in interest on our national debt. that debt keeps going up, but the democrats would lead you to believe that we're just one good tax increase away from prosperity in this country. that's not a formula. >> republicans would also have you believe that you won big medicare/medicaid spending cut away from prosperity. i don't think i'm unfair here. that's what i hear. i'm an astute student of the newspaper every morning. in other words, i don't hear that old fashioned reagan-kevin, laffer, kudlow, forbe, let's lower tax rates, as you say broaden the base. i don't hear the word growth. >> i think you listen to paul ryan or dave kevin helping to lead the charge, it is all about growth. that's the single best driver to

get our economy moving forward, get people back to work, drive down some of those expenses in medicaid and medicares and get people back to workment we have 30 million more people taking food stamps than we did a few years ago. 30 million. >> i know, don't beat up on them so much. grow the economy, then we won't need it. >> amen. >> this has dignitary. look, if great britain can lower their corporate tax rate, if portugal, i don't know if it's a real country, why can't the united states of america? >> we have the single highest corporate income tax rate in the world. that's ridiculous. >> i think we made that.. now, let's move on. we got other things, jason best of the best. i say ben bernanke will retire this coming january on his schedule. the question is, who should replace him? we're going to tell you up next, but you have to stay with us. i'm larry kudlow. [ lorenzo ] i'm lorenzo.

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thes >> as the fed officials set to embark on the two-day fomc meeting, it's likely they will continue their money policy, you can bet that, especially after today's inflation drop. we also know ben bernanke is retiring this january. he is not going to the jackson hole conference. that's a big hint. the question is, who should replace him, not two will? vice chair janet yelin is the

odd's on pick. i'm asking a different question, who should replace him to maintain king dollar and the value of money and help our economy grow? so after much deep thinking as well as phone calls to my hard money friends, the answer is...former governor and current fed critic kevin warsh. he is my man to replace bernanke. also mentioned prominently, however, in no particular order, dallas president fischer, stanford president taylor. steve forbes and past budget chairman paul ryan and for this new movement of what's called mark monitorist, i'm including bentley university professor scott sumner. that's my list, warsh the first choice. the winner by acclaim. they're all these mighty fine monetary thinkers. speak of the monetary reporter, none better than our best

reporter, chief economics cornert for the "wall street journal" who penned the piece "tame the inflation to keep fed on course." tame the inflation to keep the fed on course. i'm not saying president barack obama is not going to listen to the can you "the kudlow report." don't you think kevin warsh under different political circumstances would make a fine fed cramer? >> he was right at ber is na -- at bernanke's side. he's a lawyer, not an economist. i don't know we need more lawyers running the federal reserve. but that's one thing for you. you know, i'm going to throw something out there about yelin and that's that she's been right. i mean, if you want to talk about a firm dollar and, you know, preserving the value of the dollar and inflation, as you

said today, the government cannot let inflation numbers up 1% today. there is no inflation. people like kevin warsh were warning a couple years ago, we were going to get inflation because of the money printing the feds have done. we haven't seen it yet. i don't know if you can say it's relevant soft on the dollar. >> i have said this publicly before. i will say this again. i was 21 of those critics a couple years back, said the expansion of the reserve base was going to cause inflation. it didn't happen. when the dollar fell, we had it momentarily. basically, you are correct, fed contradiction like myself an kevin warsh and many others are wrong. that, by the way, is why i put in this name. i don't know if you know him. scott sumner from bentley university is leading the charge. it's kind of the old milt freeman monitorist charge. sumner is basically backing benefit bernanke's policy. he's saying you got to put more

money in and hope n2 grows and the velocity stops falling. a monitorist. we haven't had that in quite a while. >> let me throw two points at you. one is, you know, if you want to look for someone on the right with the kind of conservative upbringing, i think you have to include greg mankuan on your list. >> yes. >> this is a guy who was the chairman of the council of economic advisers for bush. he's a very smart level-headed guy. you know, i think if there is a smart guy some day in the future, you could see his name come up. i want to make some other potent. some other people are saying obama should get benefit bernanke in there for another term. he's actually had, for all the other problems we had, inflation is around 2%. >> lastly, what was today? i think the year over year

consumer deflator was 1%. >> 1%. >> even if you took out food and energy, which you shouldn't, it's still about 1%? >> yeah. >> here's what i will give him credit, i will say, if bernanke. >> it sounds like he made it clear to the white house he doesn't want another term. i think he deserves another credit for get we are talking swoen who has taken eight years and is prepared to walk away when he could probably have the job if he wanted it for another four years. >> i think the guy is tired. >> i think, if you want an opinion, i think we shoved term limits for fed chairman in place a long time ago. maybe we wouldn't be in this mess in the first place. >> here's the question. this janet yelin, all right, i want kevin warsh. i want my man steve forbes who links the dollar to gold. by the way, glenn hubbard, i could put him in. glenn mankiw, all smarter than i, they can do the job much better. i want to ask you honestly, as a

reporter, extraordinaire on these subjects. >> thank you. >> do you think janet yelin would run the fed any differently than bernanke, he is buying bonds, adding to the base, he's hoping to get the economy moving again. do you think there will be a difference between yelin and bernanke? >> no, i mean, she's been the little engine behind all of his movement down this track. so, you know, i think that she would stick to these policy, but she would have a dilemma. and this is the dilemma. a lot of people, a lot of her critics and people on the market see her as very dubbish. >> right. >> so there is a question whether she would be forced to prove herself by pulling back sooner than ben bernanke who has this credibility already kind of built up. whether she would have to prove herself by pulling back more quickly. frankly, i think she wouldn't. i think she has very much taken the lessons of the depression, the bernanke lessons.

she would stick to this until she sees unemployment fall. >> maybe kevin warsh and janet yelin. >> that would be an interesting combination. >> thanks, buddy, i appreciate it. now, folks, the obamacare train wreck. it's a political nightmare for the democrats in 2014. just as it was in 2010. we will tell you why next up. .

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>> it kind of looks like obamacare will be disasterous for people seeking re-election. let's talk. we have guy benson, town hall.com political editor and author of the above mentioned piece, representative jason chaffertz is still with me. guys, train wreck? a political healthcare train wreck. >> larry, well, the thing that's really interesting from the perspective from a concerned analyst. we don't have to go out there and make the case. some of the most daming indictments of this law are coming from the other side these days. whether it be members of congress, last weekend, going through a whole host of problems that senators are starting to really panic about this. whether it be one of the chief authors of the legislation, itself, senator max baucus ready to retire. >> what did baucus say? did he use the word train wreck?

>> yes, i think he did. one of the administrators said what he's hoping for is the american people to avoid a quote third world experience. these are all from the bill's supporters. i mean, the critics can sit back and let the other side tear them apart. >> my friend igor, if the author calls it a train wreck, the others calling it a third world experience, you got a problem, buddy. >> i think the quote was if you don't defend the lines on the road to a train wreck, it's not a train wreck yet. it's a difference between attacking the provision, which baucus isn't dog an sitting back like a lot of democrats not defend the fact that millions have coverage and seniors have access to preventive care. there are stories that need to be told. as you move into 2014, you need to learn about heidi highcamp, the senator from north dakota, who explained the law to people and won because of it. >> jason, i asked you, by the way, did i get this wrong?

i thought premiums were supposed to fall. are they falling? >> it was supposed to be the affordable care act. is there anybody watching this program or in the globe that thinks healthcare costs have gone down? if you going to point to south dakota, look, they're doing it great in south dakota, come on, with all due respect, nobody knows how this thing works. they're missing every deadline there is. the democrats made a fundamental error when they set up. they didn't get a single republican to vote with them. they slammed it through. they own it. they will pay the price in the next election. >> congressman, you look at the long-term trend the fact that medicare costs are down. they had to revise the provisions, it's down now partly because of the law. >> you are living in an alternate universe. everybody is saying -- a lot of people are seeing double digit increases in premiums. >> igor, i got to agree, look, you know more about the details than i do.

let me go over to guy, every time i pick up the newspaper, premiums are going up. now, they ma be going up because they know there's going to be price controls and rationings in a couple years. they may be going up because they know they have to pay all these mandate, one size fits all. they may be going up because they have to take people with prior illness, prior sickness, conditions, but the reality is, guy, they're going up, not down. it's certainly the right taxes. when taxes go up, not down the party in charge got problems. >> right. there is the medical loss arab i ratio. there is a whole reason why premiums are going up. they will go up big times the senator in maryland worried about this. people getting sticker shock on what they have to pay for their healthcare. don't forget, larry, we weren't told famililess see their price tags do down on healthcare the federal government would, too. that has absolutely not been the case t. cost curve has gone up. the deficit is going to be increase bid this law by 6.2

trillion over the next 40 years according to gao, with i is nonpartisan. larry, let me make a point. this is a misconception. you are getting half the picture t. insurer in maryland asked for a 28% rate increase, yes, the other side of the picture is all its competitors asked for smaller increases, the insurer in maryland request deny that increase, which they likely will. >> the problem is -- >> we are seeing the trend is price control. >> igor, i'd like to, look, i got to pay for premium, myself. i'd like to believe you. i know from my own plan, i'm not going to name the company, but it's a very well known company that the premiums are going up a heck of a lot. let me ask you, jason chaffertz, there is a story uncorroborated, senators, house members and their staffs will not be bound to go into the obama care plan, they won't have to go into these

so-called public marketplace exchanges and that they're going to keep their old plans, which are better than the new plan. is there anything to that? >> it better not be the case. members of congress, their staff should have to live by exactly what everybody else has to live. there should be no special curve out of this. let's understand, most people who had insurance, who were doing the right thing, who were paying for it when the affordable care passed, the rates went up. they were not able to keep the, remember, the president said, oh, you are going to be able to keep the program, that's not the case. remember when nancy pelosi said, we're going to have to pass this bill. now, we're passing it. now, we're physicaling it out. that's why saying it's a train wreck is like soft selling it. >> igor, on this point, he make as good as point. all told, we are going to be able to stay in our health plan. the reality is much different. what we're learning is, you have a business wit wite 50th employee, are you probably going to put that person and the rest of them into the so-called

public exchange. you have a business where you work 30 hours a week, which is the other criteria, are you going to say no way, i'm going to put you down to 28 hours a week. otherwise, they're going to go into the public exchanges. in other words, i would say the estimates are from the pugh foundation, elsewhere, you got a cool 25/30 million people that are going to lose their current coverage and be put into these public exchanges, they don't exist, igor, they haven't figured out how to do them yet. they can't finance them, they can't set them up. if you lose your heldlet insurance, we have no alternative because this thing is such a monstrosity. >> look, you can them for is what they will do. overwhelmingly, we will keep the coverage we have. it's the competitive advantage. it's how we attract the best workers. that's what they say as the exchanges. they will be in line. >> they are telling their employees, sorry, you have to go to part-time status. >> can i respond to that? >> go ahead. >> jason make as good as point.

>> there's a couple points here i want to refute from igor, first he says, well, the majority of businesses are saying, x, y, z, they're not developing people from their coverage. the promise from the president says everyone who like their plan, they can keep their plan. that's the promise. that's not being kept. he said some increases will be less than 25%, plus, other people can veto them. a the vetoing is going to cause a huge price control, which is going to cost a lot of people to get out of the market. >> that's a stable market. that's been stable for years. >> we will have this debate. right now, i think this plan is in deep doo-doo. they can't get it together. they can't even organize it or structure it. igor, you could convince me, buddy. you have to do better than tonight. guy benson, thank you very much. congressman chaffertz will stay with us. we got the latest on insider

stock trades. i warn you, the story is going to make you mad. that's next up on "kudlow." .

the fact is if you sit on a healthcare, you know that medicare is not moving a certain drug. that's market moving information. if you can trade stock on that information an do so legally. that's a great profit-making opportunity. >> that was my next guest on cbs' "60 minutes" is outraged over inside trading. a year ago, president barack obama signed the so-called stock act. yet, he recently gutted the bill. he did that by eliminateing online financial disclosure forms for federal officials so they could still do whatever they wish with nonpublic information or material. here now is the author, peter schwhiteser, governor of the accountability issue, author of "throw them all out." congressman chaffertz from you that you is still with us. what did they do with this bill? it looked like it was okay. now, what's happened to it? >> well, they basically did two

things. no. 1, they will not be creating an online database, where people can actually search and see what kinds of stock transactions that senior officials or members of congress might be engaejed in. the second thing is they will continue to file their financial disclosures, not electronically. they are going to file them on paper, larry. we do have this thing called the internet. but they're going to continue to file them on paper, which, of course, means they're not searchable and they're not available i available for a voter who is kind of curious what their elected official might be doing as it relates to some bill. >> all right. i'm going to do the internet in a second. let me go back to the first one. are you telling me they don't have to declare their stocks? not just the portfolio, any point where they have to declare the ownership of specific stocks? >> yes. no, they have to disclose get they do now. for federal officials in the executive branch, they've had to

do that for years. and it's publicly available. but you have to basically request it from the government. the claim was that this, by putting this information online, making it available to, for people to look at was going to create some sort of national security threat. which i'm not sure why they would argue get so they're going to have to disclose it. it's not going to be available to the general public. you have to specifically request the information. for tranparency to work, it has to be accessible. that's whole point. >> congressman chaffertz, why did this happen? >> i don't know. in today's day and age, it's cheaper, more effective to put it online. to go out and print these things, put them on a shelf in a library is not doing any good. >> who changed this? >> i don't know, this is news to me. it's not right. we'll certainly go back and pursue it. but it's easier to do it online. in today's day and age, that's where it all should be. >> peter, one point, quickly,

there was a situation that we reported on, others did, too. where, you know the so-called doc fix where at first thampl i they were going to slash the money going to doctors an hospitals and subsequently parents. it turns out the medicare agency decided to restore a lot of the funds they were going to cut. so one of the lobbyists for humana, who was also working for a brokerage firm. he says, no, no, instead of dropping 2%, we're going to add 3 or 4%. that information went out right away in an e-mail to the client. my information was, did that information go to congressmen an their portfolios that big surprise who might have owned humana or united healthcare group or whatever? >> yeah, i know exactly. that's the problem. there's two things here, larry. one is the congressman trading on that information. which you have members of congress who leave office and instead of registering as lobbyists, they go into what's called political intelligence. >> right. >> which is basically they call

up friend to find out the status of a bill and they sell that information. >> that's what this guy did. he was both a lobbyist and connected with this political intelligence firm. and i say to myself, okay, he did this, but he got the information, presumably, from the staffs of the members, so what's to stop the members and their staffs from going out and trading because, as you say, nobody is going to look up the paper trail. >> yep, that's exactly right. larry, we know based on academic research, while hedge funds historically have beat the market maybe by 8 parts in years, members of the u.s. senate have historically beaten the market by 12% a year. >> wow. >> so there is statistical evidence these guys are making interesting trades. >> that's much better then most of the hedge funds in the past year. peter schweitzer, thank you, great work as always. now, folks, imagine this, italy formed a new government. that's right. the stock markets all over the world rejoiced.

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stocks surged and the subpoena closed a new record high. profit, don't forget them. they're the mother's milk of stock. still beating estimates. they said it couldn't be done, but italy actually formed a new

government. and here at home, no inflation. central banks are pumping the prime, no, they're primeing the pump like there is no tomorrow. let's talk to distinguished experts. steve weiss of short hills capital and the author of the brand-new book "unhedged, a killing of the market." i thought this morning, you fell me if i'm wrong, that the italian government story was very positive. i don't know if it's positive for italy, but it was positive for the rest of the world and that all those bond rates in italy had come down so much that people were not worried. was that one of the trickers of today's rally? >> it certainly was in the morning, larry. you know, who would have thought about it? italy formed the government. the next thing you know, you will be telling me the economy is growing. i think the overriding thing right now for stockings, which has been the story for several months has been earnings. you go back to the third quarter of 2009, by a 2-1 ratio positive

earnings surprises have topped enterprise. >> i say this all the time. you guys heard me say this, the mother's milk of stocks is earnings. i know earnings are more important. let me air this for one second. okay. all throughout europe, steve weiss, interest rates are really rock bottom. it's a completely different story than it was a year or two ago. german, a ten-year treasury rates are just over 1%. italian rates now have a three handle on them. does that give the market and investors confidence there's not going to be a blowout. the european central bank is going, they're going to increase the money supply? they have to. they're too deflationary right now. is that contributing to the rally here? >> it is. but here's what's contributing to the rally and rates there and the rally here. that's what japan did. so japan came out. they say, we're going to go to 2% inflation. something nay have never been able to do. they talked that before. they've never done anything. then they said maybe 2% is not

high enough. so you got world's third largest economy that is going out there, not only lowering rates, but also buying stocks. so if you are -- >> the central bank is buying stocks. >> the central bank is buying stocks. >> we don't even do that. >> we don't. >> we're pumping. we're going to keep them. what you are saying is the bank of japan is buying stocks. >> yes, they said they'll buy stocks. what you got is every central bank in the world that needs pumping, pumping. so where are you going to go? you've got only a few very deep treasury markets. you want to be in the japanese market, 90% is owned by citizens. so are you seeing it come into the u.s. and germany. there is no reason the german rates should be lower than our rates in the u.s. so you will see the u.s. rates go lower. that's why you are going to see equities continue to move. >> the treasury department announced late this afternoon lo and behold they be buy back some

debt. every april they do this. revenues come in, you pay your revenue, they are flush. they buy back bonds. they haven't done it in years. now they're starting to do it. does that tell you anything? does that mean anything? >> well, in a sense, it could be tied into sequester. i think the sequester is the most underappreciated story of the last few months. >> you get to the nobel priesz. >> i love the first quarter gdp report, even though it was under the estimate of 3% they were looking for, 3.5%. defense spending, government spending was way down, yet the economy, there is more money for the private sector. >> this is the biggest drop. >> it's a sustainable drop by the private sector. >> i will ask you, this is the biggest drop in government speventding since the end of the korean war. it's not yet to sequester. it's mostly the demobilization of iraq and afghanistan, but as mike osanian, i want to ask you, will the sequester stay in place? are we going to have a trillion

dollars in budget cuts over the next ten years? >> yes, i think discretionary spending will stay at the same levels. we will see decreasing the medicare spending. thest cos will continue to go up. it's one of our biggest concerns. we got to drive down healthcare. >> so you had a few weeks ago, for managed care, the government comes out and says, the government agency, we're cutting it. then they came back an reversed it. exactly. you come in today, the hospitals, by the way, are up 10%. now i'm glad, that's because they're getting price increases that weren't expected. so what is with the government agencies that are proving these rates that don't put a lid on cost inflation when you got no inflation anywhere else in the environment, in the economy. >> the biggest unknown is the so-called affordable healthcare act. nobody knows when those dates come into play. i the you will see people go into the hospital. because particularly for medicare patients, they're not

going to have a doctor who will take medicare payment itself. >> real quick. i got no time. >> peace in the offing, in the wall street journal by the soprano guard go buy them or sell them? >> i would buy. >> buying them in hospitals for that reason it's the no. 1 group. >> i love. that by the way, instipulation slowing down everywhere. it's fascinating. michael ozanan, stephen chaffertz. thank you very much, i'm kudlow. be back tomorrow night. . [ lorenzo ] i'm lorenzo.

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